Secret money trail behind the Storm salary cap rort

Tom Reilly and Philip Wen

THE funding structure of the Melbourne Storm is set to come under intense scrutiny from accountants investigating the team's salary cap rort because most of the club's financial dealings were undertaken by a separate holding company outside of the club.

While the disgraced Storm thrashed the Auckland Warriors 40 to 6 last night, the club's latest annual report shows that all but $2 million of its $19 million income came from Valimanda, a wholly owned subsidiary of the media group News Ltd.

Under an opaque financial structure, Valimanda is the organisation that holds the licence to run the rugby league team in Melbourne. In effect, it then subcontracts Melbourne Storm Rugby League Club Ltd to run all aspects of the footballing franchise and pays it a ''management fee'' of $16.8 million.

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But questions are expected to be asked over what Valimanda's three directors - all of whom also sit on the Storm board - knew in relation to the rorts at the club. This unusual structure goes some way to explaining why the systematic payment of players outside the cap was not discovered by Storm's auditor, Ernst & Young.

Although the accounting firm would have the power to look into Valimanda finances if it suspected fraudulent activity, given the assurances from the club's directors it would have been unusual for the auditor to do so.

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Last night Channel Nine reported that Greg Inglis received an extra $180,000 on top of his $400,000 contract, including a boat worth $30,000, $20,000 worth of electrical goods and furniture, and a car. Cameron Smith had a $100,000 contract with Fox Sports on top of his salary, the report said, and Billy Slater had sponsorship deals worth $100,000. There is no evidence that the players were aware of the rort.

Valimanda is technically responsible for all deals relating to sponsorship, corporate sales and merchandising. The only big stream of cash being directly paid to Melbourne Storm is from members' ticket sales, which last financial year was $1.3 million.

As well as controlling Valimanda, News Ltd - the Australian arm of Rupert Murdoch's global media empire - also owns the Storm, half of the National Rugby League competition and half of Fox Sports, which broadcasts the competition.

Details of Valimanda's revenue and expenses are not publicly available because, unlike the Storm, it does not have to file an annual report with the Australian Securities and Investments Commission or the NRL.

The directors of Valimanda are Craig Watt, the financial controller of the Herald and Weekly Times, Mr Murdoch's publishing

arm in Victoria; Matt Hanson, the former chief financial officer and acting chief executive of the Storm, who has been stood down over his role in the rort; and Frank Stanton, a rugby league administrator who was a long-time employee of News and has now been put in charge of football matters at the Storm.

In a News Ltd paper on Saturday Mr Stanton said that he knew little about the saga. ''I'm reluctant to comment or say anything until I've met with Rob Moodie [the Storm chairman] and News Ltd and been briefed on all the details.''

But Fairfax Media can reveal that Mr Stanton has been a director of Valimanda and Storm since April 2004 and would have to have seen the club's accounts last year.

A number of other News executives may be quizzed.

Executives with the Murdoch media company who were previously directors of both Valimanda and the Storm include Keith Brodie, who is on the NRL board, Peter Jourdain - who with Brodie used to be on the board of the Brisbane Broncos - and Ken Cowley, former executive chairman of News Ltd and present News Corp non-executive director.

Despite Mr Stanton's directorships, a News Ltd spokesman, Greg Baxter, last night said he was the right man to assist Storm in the present predicament.

He said: ''He hasn't been involved in the day-to-day running of the club before, so he hasn't been that close to what's happened at the Storm. He's a very experienced rugby league man and he will be looking after the footballing aspects of the club.''

Fairfax Media understands that none of the News-appointed directors of the Storm have offered to resign.

When the chief executive of News, John Hartigan, faced a news conference on Thursday, he said he had become aware of the rort only two days earlier. He blamed the former Storm chief executive Brian Waldron.

Mr Hartigan also alluded to the involvement of others. ''There are a couple of people who have been stood down,'' he said.

''There were other people I believe who were involved but are no longer with the club.

''Our inquiries so far have identified five people who knew about the effort to conceal these payments.''

A spokesman for the Australian Securities and Investments Commission, Matthew Abbott, said no official investigation had been launched yet and the regulator was waiting for further details to emerge before deciding on a course of action.

''We're aware of the situation and we're watching it closely,'' Mr Abbott said yesterday.

''We'll be watching it closely over the next days and weeks as matters unfold.''